Figure 15-11 in 2011, Verizon Was Granted Permission to Enter

Figure 15-11 In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable television market in Upstate New York.
-Refer to Figure 15-11. Suppose the local government imposes a $2.50 per month tax on cable companies. What happens to the price charged by the cable company following the imposition of this tax?

A) The price rises from P_M to (P_M + $2.50) .
B) The price rises from P_M but it increases by an amount less than $2.50.
C) The price rises from P_M but it increases by an amount greater than $2.50 to reflect the monopoly's markup.
D) The price remains at P_M.

Correct Answer:

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